Sistema Shyam Teleservices, one of the two pan-Indian licensees impacted by the Supreme Court decision of February 2 for cancellation of 122 licences issued in January 2008, continues to add subscribers and invest money in its operations, despite the uncertainty around. Vsevolod Rozanov, president and chief executive officer of MTS India, the mobile telecom service brand of Sistema Shyam, talks to Mansi Taneja about the situation. Edited excerpts:
The SC has dismissed all the petitions filed by telecom companies for a review. What will be your next step?
We are disappointed by the SC dismissal of our petition but it has admitted the government’s petition over auction time, which is a positive thing. At the end of the day, the onus is on the government to suggest a way out. Operators have invested a huge amount of money. Customers should not suffer. More, it will create a negative precedent — I am talking for all good-faith investors, be it Videocon, Tata or Sistema. The number of subscribers is increasing and it will be much more as time passes. It is for the government to decide what has to be done with the customers and how to treat the businesses.
We want auction to happen as early as possible, especially for the initial start-up spectrum. It will be impossible to restart everything again, as it will impact the brand value. About the legal options, we are looking at every possible one. The key task is to protect the interest of customers, partners and shareholders.
Sistema has also invoked the bilateral investment treaty (BIT). If the issue is not resolved within six months, what damages will you seek from the Indian government?
BIT has been invoked between Sistema and the Republic of India. The first six months is the cooling-off period where both will discuss the issues. There is no softening or change in stand from us. According to the treaty, ideally the issue should be resolved within six months. After that, Sistema may or may not go for arbitration, depending upon the discussions. It is a very strong message. But our intention is not to seek damages; our mindset is to find a solution simultaneously, within the framework of the SC ruling.
You recently got approval for raising Rs 6,000 crore. Where do you plan to invest the money or will you reserve it for bidding in the auction process? Despite the uncertainty, you are still investing money in your operations. What is your intent?
The public doesn’t realise how much loss a company incurs for maintaining business. This money will be used for our corporate needs, for expanding our business. After the SC order, the most concerned were the banks, especially public sector banks, which were financing our business. There is a huge face value of the decision of the government of India. I completely refute all accusations that we had to be much more accurate to discuss something, to double-check and do due diligence. We can do due diligence about a particular company or about a particular partner. You can’t do due diligence of a government decision. It was fully enforced for over six years. The companies received licences and spectrum on the basis of this.
In a way, the money will be our protection against uncertainity. Banks are now coming back, giving us funding. There were three weeks of ice-cold relations after the SC order. Banks have now softened their stand. It will be hard to say whether the money will be reserved for auction, since we are still unaware of the auction rules.
Second, this business is like a steam mill; it only stops when you want to close down. You can’t switch it off and on. I can’t tell my customers, who want a higher speed for data connection, that it will not be possible because of the SC order and we have stopped investing. At this stage, you need to invest; every day costs us $2 million. This also shows our serious intent to continue the Indian operations.
Will you look at entering the GSM segment in the coming auction. Or will you continue to a major player in the CDMA space at a pan-India level?
Our intent is to double-check our decision of not going to the GSM segment once the auction rules are announced. We will definitely look at it once again. Second, our intention is to continue being a pan-India CDMA player, but at the end of the day, it will also depend on the terms and conditions.
How far did you go in convincing your customers to stick to Sistema? You also came out with a new rate plan? How has that helped in addition of subscribers?
We did not take any specific efforts. The launch of a new tariff (rate) plan has definitely helped; it came as a huge boost of confidence, especially for our partners and employees. It was planned four months back; it was just a coincidence that it came out after the SC order. We have increased our focus on MNP (mobile number portabiliity). We have much more customers coming in now, rather than going out, because of increased attention towards this area. We continue to add more and more users. There is no sign of concern on the subscribers’ part.